Rightways

Friday, August 1, 2014

Property prices in Malaysia to continue to increase, says REHDA

Property prices in Malaysia will continue to increase due to the supply and demand factor as well as the high land cost, according to Real Estate and Housing Developers Association (Rehda) president Datuk Seri FD Iskandar Mansor.

Notably, the average annual housing completion stood at 100,000 compared to the average annual household formation of 140,000, revealed the National Property Information Centre.

According to Iskandar, who also serves as managing director and chief executive officer of Glomac Bhd, the public have the misconception that developers are responsible for the rising property prices.

He explained that it is impossible for developers to maintain or lower the selling price for new launches due to land cost and high conversion premium, which has recently increased by up to 300 percent.

He also noted that the cost of doing business has been expanding each year, and, unlike before, developers no longer enjoy the 30 percent profit margin.

In fact, developers now only make around 15 percent profit margin because of high development and infrastructure charges, compliance cost, stamp duty and quit rent.

Moreover, land is getting scarce and more expensive.

“In early 2007, when Glomac bought land nearby the Petronas Twin Towers, the seller asked for RM1,000 per square feet (psf) but we wanted to pay only RM600 psf. I knew what we wanted to build on it so we paid RM1,000 psf,” said Iskandar.

“Now, that same piece of land is worth RM3,500 psf and the value of the building has risen. Land cost has tripled in the last seven years.”